The U.S. Court of Appeals for the Second Circuit today affirmed a U.S. Tax Court opinion providing that the taxpayer’s consolidated group must reduce its consolidated net operating loss (CNOL) under section 108(b)(2)(A) by the total amount of the group’s previously excluded cancellation of indebtedness income under a “single entity” approach.
The case is: Marvel Entertainment LLC v. Commissioner, No. 15-3335-ag (2d Cir. September 7, 2016).
The Second Circuit stated that it “…affirmed for substantially the reasons stated by the Tax Court in its complete and well-reasoned opinion….” Read the Second Circuit’s decision [PDF 115 KB]
The July 2015 decision by the U.S. Tax Court was a case of “first impression” with respect to identifying the appropriate net operating loss (NOL) in the consolidated return context.
Specifically, the issue before the Tax Court was whether, as a matter of law, a consolidated group’s NOL subject to reduction under section 108(b)(2)(A) for its short tax year ending October 1, 1998, was: (1) the entire CNOL of the consolidated group; or (2) a portion of the CNOL allocable to each member of the consolidated group.
The Tax Court held that when a member of a consolidated group has excluded COD income during a consolidated return year before the adoption of Reg. section 1.1502-28T (March 2004), the NOL subject to reduction pursuant to section 108(b)(2)(A) was the entire CNOL of the consolidated group. Read TaxNewsFlash-United States
© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.